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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.945525 |
| Euro to US Dollar | 1.545595 |
| Japanese Yen to US Dollar | 0.009544 |
| Canadian Dollar to US Dollar | 0.999700 |
There may be one word that best describes the mood of the stock market and investors right now: uneasy.
A dreadful first quarter is about to end. There are increasing signs that consumers are cutting back on spending. Sales of new and existing homes are showing no signs of stabilizing.
And the financial system is still trying to right itself after repeated blows from the subprime mortgage crisis forced the Federal Reserve to take extraordinary action to prevent a collapse of investment bank Bear Stearns (BSC, news, msgs).
The unease clearly showed up in the stock market on Friday, when the Dow Jones industrials jumped as many as 80 points on a better-than-expected snapshot of consumer inflation. But the rally faded as J.C. Penney (JCP, news, msgs) cut its first-quarter earnings guidance. The stock fell 7.5% to $37.48 and dragged down retail stocks generally. Several financial stocks continued to sag.
At the close, the Dow was down 86 points, or 0.7%, to 12,216. The Standard & Poor's 500 Index fell 11 points, or 0.8%, to 1,315, and the Nasdaq Composite Index slid 19 points, or 0.9%, to 2,261.
It was the Dow's fourth loss in a row; the S&P 500 and the Nasdaq have now fallen for three straight days.
The four Dow losses trimmed 332 points off the index, which had gained nearly 600 points in five sessions between March 17 and March 24.
The blue chips ended the week off 1.2%. The S&P 500 was down 1.1% on the week. The Nasdaq finished the week up slightly.
With one trading day left in March, the market is teetering on the edge of its fifth monthly loss in a row.
The Dow is down 0.4% for the month. The S&P 500 is off 1.2%, and the Nasdaq is off 0.5%. For the quarter (and year), the Dow is off 7.9%. The S&P 500 is down 10.4%, and the Nasdaq is down 14.8%.
While the Nasdaq-100 Index ($NDX.X), which tracks the biggest Nasdaq stocks, is off 16% this year, it is ahead 1.3% on the month. The reason: rebounds in such key stocks as Apple (AAPL, news, msgs), up nearly 14%; Research In Motion (RIMM, news, msgs) up 11%; eBay (EBAY, news, msgs), up nearly 15%, and Amazon.com (AMZN, news, msgs), up 8%. (Amazon is still down 25% for the year.)
So, what's going on? Here's a sample of the lingering questions:
- Is the worst of the sell-off from October over? We can offer only a weak "maybe." The S&P 500 has been suggesting that a bottom is forming at 1,200 to 1,250. (The index's low this year is about 1,256.) But pieces of the index are still very weak, especially financial stocks, and some key stocks like Google (GOOG, news, msgs), which is off 37% this year. But even if the first quarter ends with the worst results since the third quarter of 2002 and the major indexes lower for a fourth consecutive month, it's what's not known that is so maddening.
- Do some sectors of the market offer better prospects than others? The short answer is yes. Oil and gas producers look strong with crude oil above $100 a barrel and natural gas above $9 per million British thermal units. As noted, some tech stocks have rebounded strongly in March. Apple may shoot higher on reports it's about to release a new, high-speed version of its iPhone. (The stock was up 2% Friday to $143.01). The growing global demand for commodities, especially metals and food, looks like it isn't about to falter.
- How bad are the weak areas of the market? It would be impossible to count up all the weak links. But housing and financials remain weak. J.C. Penney's guidance cut -- and the selling that hit other retail stocks -- means retail stocks may be pressured in the next few months. Most analysts see more asset write-downs from banks like Citigroup (C, news, msgs) and investment houses like Merrill Lynch (MER, news, msgs). (Citigroup was the Dow's worst performer on Friday, down 4.4% to $20.83; Merrill Lynch fell 4.7% to $39.93.) One group of stocks that looks more troubled than banks is airlines, which are struggling to cope with soaring jet-fuel costs. American Airlines parent AMR Corp. (AMR, news, msgs), which closed Friday at $8.76, is off 32% for the month and nearly 38% on the quarter. It's that bad.
- Is there any hope? There will be some intense, short-term rallies in the next few weeks. One reason to be confident of this is that the short-interest on the New York Stock Exchange and on Nasdaq hit record levels in mid-March. At some point -- and probably soon -- short-sellers will start to take their profits, which means they will buy back stocks, and that will set off a chain reaction of buying. Later this year, lower interest rates and, one hopes, reduced levels of unsold homes will get cut, and that will set the stage for a more stable rebound.
Five events will key next week, including earnings reports on Wednesday from Research In Motion and agricultural chemical and seed company Monsanto (MON, news, msgs). Monsanto has been a huge winner from the boom in farm prices; the stock, up 0.8% to $114.30 on Friday, is up 116% since the end of 2006.
The Agriculture Department's big crop acreage report comes out on Monday. Automakers will report U.S. sales on Tuesday.
The mother of all the events comes Friday when the Labor Department issues its monthly report on non-farm payrolls and unemployment.
| Close for week | Wk. ago close | % chg. | YTD. chg. | |
|---|---|---|---|---|
| Dow Jones industrials | 12,216.40 | 12,361.32 | -1.17% | -7.90% |
| S&P 500 | 1,315.22 | 1,329.51 | -1.07% | -10.43% |
| Nasdaq Composite | 2,261.18 | 2,258.11 | 0.14% | -14.75% |
| Russell 2000 | 683.18 | 681.42 | 0.26% | -10.82% |
| Crude oil per barrel | $97.91 | $101.84 | 3.71% | 10.04% |
| 10-yr. Treasury yield | 3.46% | 3.33% | 4.09% | -14.15% |
| Gold per troy ounce | $936.50 | $920.00 | 1.79% | 11.75% |
J.C. Penney casts a pall on the market
All day Friday, J.C. Penney was a problem.The company warned that its first-quarter profit would be well below a previous forecast. J.C. Penney said it expects to earn 50 cents per share, down from an earlier estimate of between 75 and 80 cents per share.
Easter holiday sales were "well below expectations," the company said in a press release.
"J.C. Penney counts half of American families as its customers, and they are feeling macro-economic pressures from many areas, including higher energy costs, deteriorating employment trends and significant issues in the housing and credit markets," said Chief Executive Officer Myron Ullman.
J.C. Penney wasn't alone. Apollo Group (APOL, news, msgs), which operates the University of Phoenix chain, fell 27% to $41.21, after reporting dreadful first-quarter earnings.
Other retailers fell in sympathy. Macy's (M, news, msgs) was down 6% to $21.97, and Nordstrom (JWN, news, msgs) was down 5.7% to $32.62. Target (TGT, news, msgs) fell 2.5% to $49.69.
Diller can break up IAC/InterActive
Shares of IAC/InterActive (IACI, news, msgs) jumped nearly 7% to $20.49 in after-hours trading Friday after CEO Barry Diller won a bitter legal dispute with Liberty Media's (LINTA, news, msgs) John Malone, paving the way for him to proceed with efforts to spin off four of IAC's largest units.Shares took off on the Delaware Chancery Court ruling, which blocked Liberty's effort to oust Diller and six other IAC board members.
The decision followed a week-long court battle that exposed a deteriorating friendship between the two billionaire media moguls after more than a decade of business dealings. Liberty fell 3.2% to $16.16 in regular trading and moved up 1.1% to $16.33 in after-hours trading.
More from MSN Money
Lehman gets upgraded
Battered financial-services company Lehman Bros. (LEH, news, msgs) got some good news today.Citigroup analyst Prashant Bhatia upgraded Lehman to "buy" from "hold" on Friday, calling the company's stock price "extremely attractive." It wasn't enough, however, to boost the stock.
Lehman shares rose more than 3% in the morning but fell back to a 2.2% loss to $37.87.
Lehman has lost 42% in value since the beginning of the year amid the mortgage-market mess. "We estimate that, write-downs aside, Lehman had its second best fixed-income trading quarter ever," Bhatia wrote in a note to clients. "Lehman has ample liquidity to run its business."
Many investors had thought Lehman would go the way of Bear Stearns, but Lehman earlier this month said it had arranged $2 billion in financing to help boost its capital position.
Late Friday, The Wall Street reported that Lehman Bros. may have been a victim of a fraud in which swindlers used forged documents from one of Japan's biggest trading companies to bilk it out of as much as $250 million.
Lehman Bros. management became suspicious at the end of February when it wasn't repaid for loans aimed at helping hospitals buy medical equipment.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $105.62 | $107.58 | -$1.96 | 3.71% | 10.04% |
| Heating oil (per gallon) | $3.1050 | $3.1483 | -$0.0433 | 9.34% | 17.20% |
| Natural gas (per million BTU) | $9.8000 | $9.6870 | $0.1130 | 4.47% | 30.96% |
| Unleaded gasoline (per gallon) | $2.7050 | $2.7163 | -$0.0113 | 7.67% | 8.60% |
We save a touch more
The savings rate rose to 0.3% last month, up from a decline of 0.1% in January.Consumer spending makes up about two-thirds of the U.S. economy.
Meanwhile, the Reuters/University of Michigan Surveys of Consumers report showed that consumers are slightly less confident about prospects. The report had a March reading of 69.5, down from 70.8 in February. Economists had expected a reading of 69.9.
"Consumers are now more in favor of repaying credit cards and rebuilding their reserve funds so that they have the needed financial flexibility to handle any future twists and turns in the economy," Richard Curtain, director of the survey program, said in a statement. "Unlike the more widely shared experiences of a quarter century ago, lower income households have reported financial distress due to high fuel and food prices twice as frequently as upper income households."
KB Home reports a loss
Home builder KB Home (KBH, news, msgs) Friday reported a fiscal-first-quarter loss of $268.2 million, or $3.47 per share, well below the profit of $27.5 million, or 34 cents per share, the company earned in the same quarter a year ago.Analysts had expected a loss of $1.17 per share. Shares of KB Home fell 4.9% to $24.54 Friday.
"Until prices stabilize and consumer confidence returns, we believe inventory levels will remain significantly out of balance with demand," CEO Jeffrey Mezger said in a statement.
Liquidity problems overestimated?
Liquidity troubles in the financial-services sector may not be as widespread as many had believed.The Federal Reserve's move to open its lending window has had an effect, but there was no panic-induced run on the central bank.
The Fed had enacted a new lending facility to primary dealers on March 16, and loans to the 20 primary dealers averaged only $32.9 billion a day (of a possible $200 billion) in the week that ended Wednesday. Securities firms borrowed $75 billion from the Fed's other lending program designed to help add liquidity to the markets.
"This may indicate that liquidity problems are not as bad as previously thought," said Barry Dixon, an analyst at Davy Stockbrokers in Ireland, to MarketWatch.com.
The Fed announced its lending measures just two days after the central bank said it would help finance Bear Stearns (BSC, news, msgs) through JPMorgan Chase (JPM, news, msgs) on March 14.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 1.350% | 1.250% | 0.100 | -25.00% | -57.01% |
| 5-year Treasury note yield | 2.533% | 2.576% | -0.043 | 0.96% | -26.69% |
| 10-year Treasury note yield | 3.464% | 3.534% | -0.070 | -1.98% | -14.15% |
| 30-year Treasury bond yield | 4.338% | 4.376% | -0.038 | -1.86% | -2.71% |
| Currencies | |||||
| U.S. Dollar Index | 72.105 | 72.040 | 0.065 | -2.24% | -5.98% |
| British pound in dollars | $1.9932 | $2.0072 | -0.0140 | 0.16% | 0.20% |
| Dollar in British pounds | £0.5017 | £0.4982 | 0.0035 | -0.16% | -0.20% |
| Euro in dollars | 1.5768 | 1.5788 | -0.0020 | 3.88% | 7.88% |
| Dollar in euros | € 0.6342 | € 0.6334 | 0.0008 | -3.73% | -7.31% |
| Dollar in yen | ¥99.40 | ¥99.62 | -0.22 | -4.58% | -11.13% |
| Canadian dollar in U.S. dollars | $0.982 | $0.983 | -$0.0005 | -3.20% | -1.08% |
| U.S. dollar in Canadian dollars | $1.019 | $1.018 | $0.0012 | 3.20% | 1.10% |
| Commodities | |||||
| Gold | $936.50 | $954.00 | -$17.50 | 1.79% | 11.75% |
| Copper | $3.8315 | $3.8730 | -$0.04 | 7.22% | 25.99% |
| Silver | $17.9400 | $18.5500 | -$0.61 | 6.47% | 20.24% |
| Crude oil (NYMEX) (per barrel) | $105.62 | $107.58 | -$1.96 | 3.71% | 10.04% |
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